Data: The missing piece in ESG Frameworks

Author(s):

[molongui_author_box]

Share:

Join Our Newsletter

Subscribe to the Datasphere Pulse for updates on data governance news and activities.

This article was originally posted in the ASPEN blog as part of the Council For A Fair Data Future.

Lorrayne Porciuncula, Executive Director, Datasphere Initiative is a member of Aspen Digital’s Council for a Fair Data Future, a diverse team of experts, advocates, and practitioners imagining an equitable data economy that works for everyone.

The time has come to add a Data dimension to ESG frameworks.

ESG frameworks have progressively established themselves as a useful tool to assess a company’s environmental, social, and corporate governance practices. They provide a holistic approach for third parties to evaluate an organization’s impact on the planet, its relations with its stakeholders, and its internal operations. ESG frameworks are far from being a silver-bullet solution to driving corporate behavior, but they have recognizably provided useful metrics and guidance for the company itself to conduct its activities in a responsible manner and obtain corresponding recognition by investors and stakeholders in a competitive market environment.¹

However, a crucial dimension is missing: responsible data governance.

In the last few decades, a massive transformation has occurred: the digital age emerged and data became the crucial resource, and its transformative power directly shapes our society. As this data-driven ecosystem expands, so does the urgent need for responsible data governance: to truly harness the potential of data and build a future that benefits all, we must ensure that data governance practices are transparent, accountable, and equitable.

In that context, all corporations are now massively collecting, processing, analyzing and using data, be it personal or non-personal. Yet, the dimension of fair and responsible data governance has largely been neglected within ESG frameworks.

Integrating a data dimension into ESG Frameworks would serve the same dual purpose described above: providing mutually agreed criteria for third-party evaluation of corporate actors, but also guidance to decision-makers in their efforts towards responsible data practices.

In that respect, a data dimension in ESG could address, at minimum, two aspects:

  • First, the degree of respect of various national or international legal obligations (in particular regarding privacy protection) and the security measures implemented to prevent accidental leaks or breaches,
  • Second, the impact of the corporation’s data practices on existing ESG dimensions: environmental footprint (e.g. energy consumption of data centers), social equity (e.g., preventing biases in AI tools, fair distribution of created value), and corporate governance (e.g., decision-making procedures for internal data management and oversight).

Expanding ESG frameworks to incorporate this dimension would create incentives for companies to adopt better data governance practices. Holding organizations more accountable for how they collect, process, and utilize data, will encourage them to prioritize privacy, data security, and ethical considerations in their operations. This expansion will enable investors, stakeholders, and consumers to make informed decisions based not only on financial performance but also on a company’s commitment to responsible data practices. It will also establish clear guidelines and expectations for responsible data practices, promoting transparency, trust and alignment of incentives among stakeholders.

The Datasphere Initiative, a non-profit foundation that I am proud to lead, is dedicated to advancing innovative frameworks to “responsibly unlock the value of data for all”. We believe that by integrating fair data governance practices into ESG frameworks (D-ESG), we can foster a more inclusive and equitable data-driven ecosystem.

In that regard, in addition to companies’ proper internal management of their data and their expected caution regarding possible negative externalities, we believe our collective interest in responsibly unlocking the value of data for all also points towards a third aspect of the data dimension in ESG.

Some of the data collected by companies can be beneficial for other sectors or for public interest uses (e.g., mobility data for smart cities, or anonymized aggregated medical statistics to detect epidemics). A third component of a D-ESG approach should therefore explore incentives for companies to proactively identify datasets that could, under appropriate protections and value sharing agreements if needed, be made available to other actors. Acceptance of this approach may take time, and require extensive discussions, but it will ultimately constitute an ineluctable evolution. This reasoning could also apply beyond corporate actors to public entities handling data.

The time has come for us to recognize that data governance is a broad societal imperative.

How we collectively govern data will determine the digital society we live in. We should collectively not only expect companies to be accountable for their data practices, but also argue that their responsibility also entails contributing to a healthy and flourishing datasphere that creates value for all. By integrating fair data governance into ESG frameworks, we can create a powerful mechanism to drive positive change, ensure that these frameworks remain relevant and adaptable to the changing data ecosystem, and build a future where data is harnessed for the greater good.

Now is the time for policymakers, industry leaders, to embrace proposals that rethink concrete incentives for better data practices. Prioritizing the numerous issues and tradeoffs of data equity will be challenging. Yet, it is crucial if we are to change the face of the data economy and ensure our actions work for all people and the planet. 

Let us work together to shape a future where data is a force for positive transformation, where the unlocking of its value benefits all, and where responsible data governance becomes a cornerstone of corporate practice. Together, we can build a fair and responsible data-driven world that we can all be proud of.

Aspen Digital’s Council for a Fair Data Future presents a unique space to explore such an avenue and shape the necessary debate.

References

¹ See for example the experience of ESG analysis in global food supply chains led by FAIRR, available at: https://www.fairr.org.

Join Our Newsletter

Subscribe to the Datasphere Pulse for updates on data governance news and activities.

The Datasphere Initiative is a global network of stakeholders fostering a holistic and innovative approach to data governance to build agile frameworks to responsibly unlock the value of data for all.

@2024. Datasphere Initiative. All rights reserved
Privacy Policy